Singapore’s ministry of trade and industry (MTI) has warned that the country’s GDP for 2020 could fall by as much as 7% because of Covid-19 disruption. If it falls by more than 5% this would be the steepest drop in the country’s history since its independence from Malaysia in 1965.
The country has been struggling with rising cases of the virus in recent weeks, with the number of cases passing 32,000 as of 26 May. The majority of those cases are within the city state’s ‘dormitories’, where many of its migrant workers live.
However, the disruption in the external economic environment is what appears to be having the most significant impact on the country’s fortunes. Many of the country’s outward-facing sectors such as manufacturing, wholesale trade and transportation and storage are being adversely affected by what the MTI calls “deterioration in the external demand outlook”.
The MTI now expects the country’s GDP to decline by between 4% and 7% over the course of 2020, a downgrade from its last update where it was expected to decline by between 1% and 4%.
Singapore’s banks are in a strong position to withstand a period of economic difficulty, with its three largest banks having BIS Capital Adequacy (Core Tier 1) ratios of more than 14%. All three have also had steadily increasing pre-tax profits in the past five years.
